PIAC lodged a submission to the Australian Energy Regulator’s (AER) review of its Regulatory Investment Test (RIT) application guideline. The RIT is a cost-benefit test that regulated electricity businesses must apply to major investments to provide transparency of the network’s decision to implement a particular solution and to provide an opportunity for third-parties to offer more cost-effective non-network solutions.
PIAC considers that the AER’s guidelines should ensure that:
- the issue the network business intends to address is well understood, and defined in terms of the impact on consumers;
- the base case is a credible reflection of the consumer impacts from ‘business as usual’ rather than ‘do nothing at all’;
- there is meaningful and effective engagement of non-network solution providers and stakeholders;
- all viable potential solutions are fully considered; and
- alternative options are treated fairly and accurately such as with respect to risk, the value of optionality and the timing of expenditure.
The uncertainty in demand growth, the cost trajectories of new technologies and the potential for new ‘game-changing’ technologies will place a greater importance on the robustness of modelled outcomes and the optionality of certain solutions. PIAC strongly supports the use of modelling, forecasts and assumptions which are consistent, open and transparent. There is a role for the Australian Energy Market Operator (AEMO) in developing a suitable set of modelling forecasts, scenarios and assumptions given its role as a national planner with oversight across the entire NEM.
